LO 1 - Bassic Accounting For Non-Accountants - For Treasurer and Internal Auditors

Welcome Participants
To Compliance Training
Basic Accounting for Non-

Accountants
1
Basic Accounting for Non-Accountants
Course Description
This course covers the knowledge, skills and

attitudes required of the Treasurer and a
member of the Audit Committee in basic
accounting for cooperatives.
2
Summary of Learning Outcome (LO)
• LO1. Explain the Basic Accounting Concepts

and Procedures.
• LO2. Explain the different Financial

Statements and their significance.
• LO3. Apply the Standard Chart of Accounts to

respective cooperatives.
3
LO1: Explain the Basic Accounting Concepts and Procedures
1. Principles of Accounting
2. Books of Accounts
3. Accounting Equation
4. Concept of Debit and Credit
5. Journal Entry
6. The Accounting Cycle
4
What is Accounting
Accounting is a service activity. Its function
is to provide quantitative information,
primarily financial in nature, about
economic entities, that is intended to be
useful in making economic decision
As defined by Accounting
Standard Council of the
Philippines
5
What is Accounting
Accounting is the process of identifying,
measuring and communicating economic
information to permit informed judgment
and decision by users of the information
As defined by American
Accounting Associations
Users 6
What is Accounting
Accounting is the process of identifying,
measuring and communicating economic
information to permit informed judgment
and decision by users of the information
1. Identifying is the process of recognition or non-recognition of

business activities as accountable events (transactions)
2. Measuring is the process of assigning of peso amounts to the
economic transactions and events
3. Communicating is the process of preparing and distributing
accounting reports to potential users of accounting information
7
Communicating Process
1. Recording (Journalizing)is the process of

systematically maintaining a record of all
economic business transactions after they have
been identified and measured
2. Classifying (Posting to the Ledger) is the
sorting or grouping of similar and interrelated
economic transactions
3. Summarizing is the preparation of financial
statements
8
Objectives of Accounting
1. To keep systematic records of financial
transactions of a business
2. To protect business properties
3. To determine the operational profit or loss
4. To determine the financial condition of a
business
5. To facilitate rational business decision making
9
Main Product / Output of Accounting
• Financial Statements
1. Statement of Financial Condition
2. Statement of Operations
3. Statement of Cash Flows
4. Statement of Changes in Equity
5. Notes to Financial Statements
10
Users of Financial Statements
• Internal Users
1. Owners / Existing Members
2. Management
3. Employees
• External Users
1. Government Agencies
2. Financing Institutions
3. Investors
4. Vendors / Suppliers
5. Potential Members Accounting
11
Why Cooperative needs
Accounting?
Cooperative Defined
• an autonomous and duly registered association of
persons
• with a common bond of interest
• who have voluntarily joined together to achieve their
social, economic, and cultural needs and aspirations
• making equitable contributions to the capital
required
• patronizing their products and services
• accepting a fair share of the risk and benefits of the
undertaking in accordance with universally accepted
cooperative principles
12
Why Cooperative needs
Accounting?
• Cooperative is engaged in business

• and every business organization
needs accounting
• to provide quantitative information for
better business decision
13
Main Elements / Parts of Statement of
Financial Condition
1. Assets
2. Liabilities
3. Equity
14
Main Elements / Part of Statement of
Financial Condition
1. Assets
• things of value obtained, owned or
controlled by the cooperative
• are resources received which have
future benefits
15
Financial Condition
2. Liabilities
• amounts owed by the business to
others (creditors)
• obligations of the cooperative that
has to be settled either by paying
sum of money, rendering of service,
or delivering goods
16
Financial Condition
3. Equity of cooperative is further classified
as
3.1 Members’ Equity
3.2 Donated Capital
3.3 Statutory Funds
17
Financial Condition
3. Equity of cooperative
3.1 Members’ Equity
» interest of members in the
cooperative
» contributed capital of members
18
Financial Condition
3.2 Donated Capital
» amounts received by the
cooperative as awards, subsidies,
grants, aid, etc.
» not available for distribution as
interest on share capital and
patronage fund
19
Financial Condition
3.3 Statutory Funds
» the mandatory funds established
or set up in accordance with
articles 85 and 86 of the
Cooperative Code 0f 2008(RA
9520)
20
The Basic Accounting Equation in
General
Assets = Liabilities + Equity
Resources / Claims of the Claims of the Owners

Properties = Creditors from the + from the properties of
properties of the the business
business
21
The Basic Accounting Equation
P 100,000 = P 30,000 + P 70,000
22
The Basic Accounting Equation of a
Cooperative
Assets = Liabilities + Members’ Equity

+ Donated Capital
+ Statutory Funds
23
Operations
• Amounts received in exchange for goods and

Revenues services given by the cooperative to its
members as well as non-members
Expenses • Cost incurred by the coop in the process of

obtaining income
Surplus / • Surplus is the Excess of Revenues over

Expenses
• Deficit is the Excess of Expenses over
Deficit Revenues
24
The Basic Accounting Equation
Expanded

+ Revenues
- Expenses
25
Books of Accounts
• Journals
• Books of Original Entry
• Ledgers
• Books of Final Entry
26
Books of Accounts
• Journals
• General Journal
27
Books of Accounts
28
Books of Accounts
• Journals
• General Journal
• Special Journals
–Cash Receipts
29
Books of Accounts
Cash Receipt Book

Cash Cash Int. Serv. Share Saving Cash
Received OR On In A/R L/R Inc. Fee Fines Cap Dep Sales S U N D R Y
Date From No. Hand Bank
DR DR CR CR CR CR CR CR CR CR Account DR CR
30
Books of Accounts
• Journals
• General Journal
–Cash Receipts
–Cash Disbursements
31
Books of Accounts
Cash Disbursement Book
Cash Shr Sav Cash Frei. Travel Suppli
CV Chk In A/P L/R Cap Dep Pur In Exp es S U N D R Y
Date Paid To No. No. Bank Exp
CR DR DR DR DR DR DR DR DR Account DR CR
32
Books of Accounts
• Journals
• General Journal
–Cash Receipts
–Sales
33
Books of Accounts
Sales Book
Cash Distribution of Sales
Date Sold To SI A/R Sales Sales
No. DR DR CR Grains Beverages Can Goods Fertilizer Others
34
Books of Accounts
• Journals
• General Journal
–Cash Receipts
–Sales
–Purchases
35
Books of Accounts
Purchase Book
Cash Distribution of Purchases
Date Purchased RR Purc. Pur. A/P
From No. DR CR CR Grains Beverages Can Goods Fertilizer Others
36
Books of Accounts
• Journals
• General Journal
–Cash Receipts
–Sales
–Purchases
–Others
37
Books of Accounts
• Ledgers
• General Ledger
38
Books of Accounts
39
Books of Accounts
• Ledgers
• General Ledger
• Subsidiary Ledger
40
Books of Accounts
41
Books of Accounts
42
Accounting and Bookkeeping System
System’s Diagram
Source Documents Books of Accounts Financial Statements
Official Receipt Cash Receipt Book
Sales Invoice Sales Book

Statement of
Financial
Cash Voucher Cash Disbursement Book General Trial Condition
Ledger Balance
Statement of
Receiving Report Purchase Book Operations
Service Book Subsidiar Statement of

Service Invoice
y Ledgers Operations
Journal Voucher General Journal
43
Financial Accounting versus
Managerial Accounting
– Financial Accounting
• Recording of business transactions
• Preparation of general purpose reports (Financial Statements)
• Intended for internal and external users
• Should follow generally accepted accounting principles
– Managerial Accounting
• Accumulation and preparation of financial reports for internal users
only
• Not required to follow generally accepted accounting principles
44
Generally Accepted Accounting
Principles (GAAP)
– Rules, procedures, practice and standards followed in the
preparation and presentation of financial statements
– Financial Reporting Standards Council (FRSC)

• standard setting body created by the PRC from the
recommendation by the Board of Accountancy
• to establish and improve accounting standards that will be
generally accepted in the Philippines
– Philippine Financial Reporting Standards (PFRS)

• Accounting standards issued by FRSC that will constitute the
generally accepted accounting principles in the Philippines
– Purpose of Accounting Standards

• To have a common understanding between preparers and users
of financial statements. 45
Separate Entity Concept
The Business has a Juridical

Personality separate and distinct from
the Owner(s) or Members
46
Separate Entity Concept
• Therefore, the Assets, Liabilities and
Equity of the Business must be Treated
Separately from those of the members
• Always remember that what we are

recording are the financial transactions of
the business and not of the owner /
member
47
Basis of Accounting / Recording
• Methods used to determine when

revenues and expenses (with associated
assets and liabilities) are recognized and
recorded in the books of accounts, and
reported in the financial statements
48
Commonly Used Basis of
Accounting
• Accrual Basis Accounting

• Cash Basis Accounting
• Modified Accrual Basis Accounting
49
Accrual Basis Accounting
• Revenues are recognized when earned

and expenses are recognized when
incurred whether or not any cash is
received or paid
50
Cash Basis Accounting
• Revenues and expenses are recognized

only when cash is received or paid,
irrespective of the timing of actual sales or
purchases (regardless when revenues and
expenses are earned and incurred)
51
Modified Accrual Basis Accounting
• Also referred as Modified Cash Basis

Accounting
• Combined elements of both Accrual and
Cash Basis Accounting
52
Bookkeeping
• The process of recording and classifying
business financial transactions (activities)
• The accounting task prior to the preparation
of Trial Balance
• It includes:
1. Record Keeping
2. Journalizing
3. Posting to the Ledger
53
Difference between Accounting
and Bookkeeping
ACCOUNTING
1. Installations of
Accounting System BOOKKEEPING
and Internal Controls
2. Bookkeeping Records and Posts
3. Financial Reports Routine Transactions
4. Financial Statement
Analysis
5. Auditing
6. Tax Returns
54
Two Types of Bookkeeping System
1. Single Entry is a type of
accounting/bookkeeping system that records
every transaction at one place only
2. Double Entry is a type of
accounting/bookkeeping system that records
every transaction in at least two places
(accounts) using debit and credit to represent
increases and decreases effects of the
transaction
55
Sample Single Entry Recording
Date Description Revenues Expenses
Jan 4 Sold merchandise 275.00
Sample Double Entry Recording

Date Accounts Debit Credit
Jan 4 Cash 275.00
Sales 275.00
To record cash sales transaction
56
Parts of Double Entry System of
Recording Transactions
• Date when the transaction occurred
• At least two accounts on which the effects of
the transaction is to be recorded
• Debit and Credit columns on which the
amount of increase and decrease effects of
the transactions are entered
57
Important Things to consider in
Double Entry System
DEBIT is always on the left side of
accounting equation while the CREDIT is on
the right side
In every single transaction, the Total DEBIT
must be equal to the Total CREDIT
58
Definition of Account
Account is a detailed record for each

type of asset, liability, equity,
revenue, and expense on which the
increase or decrease effects of every
transactions are being recorded
59
What is Chart of Accounts
Chart of Accounts is a listings of all

accounts on which the effects of
financial transactions are being
recorded
60
What is Financial Transaction
Financial Transaction is an event or

condition that must be recorded in
the books of a business because of
its increase or decrease effects on
the financial condition of the
business
61
Debit and Credit
1. Debit or Credit is use to record the increase or

decrease effect of a transaction to a particular
account
2. Debit is entered on the Left Side column while

Credit is entered on the Right Side column
3. Debit doesn’t necessarily mean an increase

and Credit doesn’t necessarily mean a
decrease and vice versa
62
Debit and Credit
The problem is when to use the Debit or

Credit to increase or decrease the balance
of a particular account
63
Expanded Accounting Equation
Assets = Liabilities + Equity + Revenues – Expenses
64
Accounting Equation to Show the
Normal Balance of Account
Assets + Expenses = Liabilities + Equity + Revenues
65
Accounting Equation to Show the
Normal Balance of Account
Assets + Expenses = Liabilities + Equity + Revenues
Normal Balance Normal Balance

is Debit is Credit
66
Simple Rule of Debit and Credit
• Enter an amount in the Normal
Balance Side of an Account to
Increase the Balance of an Account
• and in the Opposite Side of an
Account to Decrease the Balance of
an Account
67
How To Use and Apply The Debit and
Credit Rule
1. Determine the types of accounts the
transactions affect: asset, liability, revenue,
or expense account
2. Determine if the transaction increases or
decreases the account's balance
3. Apply the debit and credit rule based on the
types of accounts and whether the balance
of the account will increase or decrease
68
Rule of Debit and Credit Applied
The “T” Account
Debit Credit
69
Cash on Hand (Assets)
Debit Credit
10,000 7,000
2,000
12,000 7,000
5,000 70
Accounts Payable (Liabilities)
Debit Credit
5,000 5,000
10,000
5,000 15,000
10,000 71
Share Capital (Equity)
Debit Credit
4,000 15,000
15,000
4,000 30,000
26,000 72
Salaries (Expense)
Debit Credit
4,000
4,000
3,000
11,000 0
11,000 73
Membership Fee (Revenue)
Debit Credit
3,000
6,000
0 9,000
9,000 74
Accounting Cycle
The sequence of activities / steps beginning

with the occurrence of a transaction up to
the Preparation of Financial Statements
and Closing of Books
75
Accounting Cycle - Steps
1. Identify the 2. Analyze the 3. Make Journal 4. Post to
Transaction Transaction Entries Ledger
8. Financial 7. Adjusted 6. Adjusting 5. Trial

Statements Trial Balance Entries Balance
9. Closing 10. Post-Closing

Entries Trial Balance
76
1. Identify the
Transaction
1. Identify the transaction using source

documents
• Invoice
• Receipts
• Deposit Slips
• Voucher
77

9. Closing 10. After-Closing

78
2. Analyze the
Transaction
1. Determine which accounts are affected

2. How the accounts are affected (Increase
or Decrease) and how much is the
amount
79


80
3. Make Journal
Entries
81
3. Make Journal Example 1 - On January 3, 2004, the coop
Entries received P200 each from the 15 cooperators
as payment for membership fee
01/03/04 Cash on Hand 3,000
Membership Fee 3,000
82
Entries received P15,000 from the 15 cooperators as
payment for Capital share
01/04/04 Cash on Hand 15,000
Paid-up Share Capital 15,000
83
3. Make Journal Example 3 - On January 6, 2004, the coop paid
Entries P500 registration fee to the CDA and P600
Bond Insurance to Insular Inc.
01/06/04 Taxes and Licenses 500
Bond and Insurance Expense 600
Cash On Hand 1,100
84
Entries received P200 each from 30 incoming
members

01/07/04 Cash on Hand 6,000
Membership Fee 6,000
85
Entries received P500 each from the 30 newly
accepted incoming members

01/08/04 Cash on Hand 15,000
Paid-up Share Capital 15,000
86
Entries paid P800 as payment for 10 booklets of
Official Receipts

01/15/04 Office Supplies Expense 800
Cash on Hand 800
87
3. Make Journal Example 7 - On January 20, 2004, the coop purchased 1
Entries unit of 2nd hand computer amounting P5,000 from a member
to be paid as follows: 50% down payment and the balance
on June 30, 2004
01/20/04 Office Equipment 5,000
Cash on Hand 2,500
Accounts Payable 2,500
88
3. Make Journal Example 8 - On January 21, 2004, the coop purchased 1
Entries unit of printer on cash for P2,000 and various office supplies
amounting P1,000

Office Supplies Expense 1,000
Cash on Hand 3,000
89
3. Make Journal Example 9 - On January 22, 2004, the coop paid the net
Entries proceed of loan availed by member “A” as follows: Amount
of Loan (P10,000), Deductions: Filing Fee (P20), Service
Fee (P100), Interest on Loan (P1,200), Retention (P300)
01/22/04 Loans Receivable 10,000
Filing Fee 20
Service Fee 100
Interest Income on Loan 1,200
Share Capital 300
Cash on Hand 8,380

90


91
4. Post to
Ledger
92
4. Post to
Ledger
General Journal Page No. 002

Cash on Hand 3,000
 Purchase of 1 unit printer and

various office supplies
93

Cash on Hand 3,000

General Ledger
Account Title: Office Equipment
Date Particulars Ref. Debit Credit Balance

01/21/04 1 unit Printer GJ-002 2,000 2,000
94

Cash on Hand 3,000

General Ledger
Account Title: Office Supplies Expense

01/21/04 Various office supplies GJ-002 1,000 1,000
95

Cash on Hand 3,000

General Ledger
Account Title: Cash on Hand

01/20/04 Membership Fee GJ-001 8,000 8,000
01/21/04 1 unit Printer & supplies GJ-002 3,000 5,00096

General Ledger
Account Title: Cash on Hand

01/20/04 Membership Fee GJ-001 8,000 8,000
01/21/04 1 unit Printer & supplies GJ-002 3,000 5,00097
Cash on Hand
Debit Credit
8,000 3,000
8,000 3,000
5,000 97


98
Trial Balance
• Statement of account balances of all General
Ledgers at a particular time
• Trial meaning – the act of testing something /

Trying something to find out about it
99
Purpose of Trial Balance
• To ensure the entries in the double-entry
bookkeeping system are mathematically
correct
• To verify that the total debits and credits of all

accounts in the General Ledger are balance
• To facilitate the preparation of financial

statements
100
Limitations of Trial Balance
• It cannot detect all errors in the accounting
system such as the following:
1. Improper use of account title
2. Improper posting to the wrong account to the
General Ledger
3. Omission or failure to record financial
transactions (especially material transactions)
4. Understatement or Overstatement of account
balances
101
Three Types of Trial Balance
• Unadjusted Trial Balance – Prepared before
adjusting entries are made (Also called as Pre-
Closing Trial Balance)
• Adjusted Trial Balance – Prepared after

adjusting entries are made
• Post-Closing Trial Balance – Prepared after

closing entries are made
102
103
104


105
106
107
108
Closing of Income and Expense
Accounts to Net Surplus
12/31/14 Membership Fee 4,500
Service Fee 500
Filing Fee 100
Interest Income 6,000
Taxes and Licenses 500
Insurance Expense 500
Office Supplies Expense 400
Net Surplus 9,700
 To close income and expense

accounts to Net Surplus account 109
110
111
Allocation & Distribution of Net Surplus -
Example
Legal Basis = Art. 85 and 86 of RA 9520
Net Surplus (NS) 100,000

Reserve Fund (not less than 10% of NS) 10,000
CETF – Local (½ of maximum10% of NS) 5,000

5,000
CETF – Due to APEX (1/2 of maximum 10% of NS)
Optional Fund (not more than 7% of NS) 7,000
Community Development Fund (not less than 3% of NS) 3,000

Total Statutory Reserves (SR) 30,000
Amount Available for ISC and PR 70,000
112
Distribution of Remaining Net Surplus After
Deducting Statutory Funds
Legal Basis = Art. RA 9520 and Section 11 of
Rule 10 of IRR of RA 9520
The amount allocated for patronage refund

shall not be less than thirty (30%) of the net
surplus after deducting the statutory reserves.
Provided, however, that in no case the rate of
patronage refund be more than twice the rate
of interest on share capital.
113
Allocation & Distribution of Net Surplus -
Example
Reserve Fund (not less than 10% of NS) 10,000
CETF – Local (½ of maximum10% of NS) 5,000

5,000
Optional Fund (not more than 7% of NS) 7,000
Community Development Fund (not less than 3% of NS) 3,000
For Interest on Share Capital (50% of NS – SR) 35,000
For Patronage Refund (50% of NS – SR) 35,000

Total ISC and PR 70,000
Net Surplus as Allocated 100,000

114
Allocation & Distribution of Net Surplus-Answer
to the workshop

Reserve Fund (10% of NS) xxx
CETF – Local (½ of of 10% of NS) xxx

xxx
CETF – Due to APEX (1/2 of of 10% of NS)
Optional Fund (7% of NS) xxx
Community Development Fund (3% of NS) xxx
Total Statutory Reserves (SR) xxx
Amount Available for ISC and PR xxx
For Interest on Share Capital (70% of NS – SR) xxx
For Patronage Refund (30% of NS – SR) xxx

Total ISC and PR xxx

115
Allocation & Distribution of Net Surplus-Answer
to the workshop

Reserve Fund (not less than 10% of NS) 970
CETF – Local (½ of maximum10% of NS) 485

485
Optional Fund (not more than 7% of NS) 679
Community Development Fund (not less than 3% of NS) 291
For Interest on Share Capital (70% of NS – SR) 4,753
For Patronage Refund (30% of NS – SR) 2,037

Total ISC and PR 6,790

116
Closing Journal Entries
12/31/14 Net Surplus 9,700
Reserve Fund 970
CETF-Local 485
Due to Union/Federation 485
Optional Fund 679
Community Development Fund 291
Interest on Share Capital Payable 4,753
Patronage Refund Payable 2,037
 To close Net Surplus account

117
118
119
120
121


122
LO1: Explain the Basic Accounting Concepts and Procedures
 Principles of Accounting
 Books of Accounts
 Accounting Equation
 Concept of Debit and Credit
 Journal Entry
 The Accounting Cycle
 Trial Balance
123

LO 1 - Bassic Accounting For Non-Accountants - For Treasurer and Internal Auditors

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Welcome Participants

Basic Accounting for Non-

This course covers the knowledge, skills and

Summary of Learning Outcome (LO)

• LO1. Explain the Basic Accounting Concepts

• LO2. Explain the different Financial

• LO3. Apply the Standard Chart of Accounts to

LO1: Explain the Basic Accounting Concepts and Procedures

1. Identifying is the process of recognition or non-recognition of

1. Recording (Journalizing)is the process of

• Cooperative is engaged in business

Assets = Liabilities + Equity

Resources / Claims of the Claims of the Owners

Assets = Liabilities + Equity

P 100,000 = P 30,000 + P 70,000

Assets = Liabilities + Members’ Equity

• Amounts received in exchange for goods and

Expenses • Cost incurred by the coop in the process of

Surplus / • Surplus is the Excess of Revenues over

Assets = Liabilities + Equity

Cash Receipt Book

Official Receipt Cash Receipt Book

Sales Invoice Sales Book

Service Book Subsidiar Statement of

– Financial Reporting Standards Council (FRSC)

– Philippine Financial Reporting Standards (PFRS)

– Purpose of Accounting Standards

The Business has a Juridical

• Always remember that what we are

• Methods used to determine when

• Accrual Basis Accounting

• Revenues are recognized when earned

• Revenues and expenses are recognized

• Also referred as Modified Cash Basis

Sample Double Entry Recording

Account is a detailed record for each

Chart of Accounts is a listings of all

Financial Transaction is an event or

1. Debit or Credit is use to record the increase or

2. Debit is entered on the Left Side column while

3. Debit doesn’t necessarily mean an increase

The problem is when to use the Debit or

Assets = Liabilities + Equity + Revenues – Expenses

Assets + Expenses = Liabilities + Equity + Revenues

Assets + Expenses = Liabilities + Equity + Revenues

Normal Balance Normal Balance

The sequence of activities / steps beginning

8. Financial 7. Adjusted 6. Adjusting 5. Trial

9. Closing 10. Post-Closing

1. Identify the transaction using source

8. Financial 7. Adjusted 6. Adjusting 5. Trial

9. Closing 10. After-Closing

1. Determine which accounts are affected

8. Financial 7. Adjusted 6. Adjusting 5. Trial

9. Closing 10. After-Closing

Date Accounts Debit Credit

01/03/04 Cash on Hand 3,000

Membership Fee 3,000

Date Accounts Debit Credit

01/04/04 Cash on Hand 15,000

Paid-up Share Capital 15,000

Date Accounts Debit Credit

01/06/04 Taxes and Licenses 500